Hang Seng Tech Index barely holds above 4,900 points after Tencent and Alibaba announce earnings

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（Source: First Financial News）

Tencent Holdings (00700.HK) and Alibaba (09988) announced earnings slightly below market expectations, repeatedly dragging down the Hang Seng Tech Index. On the morning of March 20, the Hang Seng Tech Index narrowly held above 4,900 points, closing at a 1.7% decline at 4,911 points with a turnover of HKD 41.3 billion. Alibaba fell sharply by 5.76%, and Xiaomi Group (01810.HK), which recently announced new cars, dropped 6.94%.

Industry insiders believe that after the earnings reports from these two internet giants, most of the risk in the Hang Seng Tech Index has been released. The focus now shifts to next week’s earnings from Meituan (03690) and Xiaomi Group, among others. The ongoing tension in the Middle East remains a negative factor that needs time to be digested. The Federal Reserve kept interest rates unchanged, with limited chances of further rate cuts this year. In the short term, continued risk release will further lower valuations, highlighting the medium- and long-term investment value of the Hang Seng Tech Index.

Guotai Securities International Strategist Wu Lixian told First Financial News that after the major tech stocks announced earnings, their stock performance was relatively weak, dragging the Hang Seng Tech Index lower. As constituent companies release results, short-term negative news is further digested by the market. However, tech stocks still face challenges from the Middle East situation, with high oil prices significantly impacting interest rates. Previously, the Hang Seng Tech Index touched a low of around 4,750 points. Around 4,800 points may serve as a better support level. From a medium- to long-term perspective, tech stocks still have opportunities to perform this year, with valuations gradually becoming more attractive.

Blue Water Capital Management Limited Chief Investment Officer Li Zeming stated that Tencent, Alibaba, and Xiaomi dragging the index down suggests that most short-term risks have been released. Both Tencent and Alibaba have fallen to key support levels. Alibaba’s decline was due to a gap between earnings and market expectations, while Xiaomi’s upcoming earnings release next week has already released some risk. The Hang Seng Tech Index should find good support around 4,800 to 4,900 points. Further short-term declines are limited, but more risks remain in the long term, as the market worries that AI-related investments may not meet expectations.

Li Zeming also expressed concern that the ongoing tension in the Middle East is gradually affecting various industries. Risks are being released as oil prices rise, but the longer the tension persists, the higher oil prices go, gradually impacting specific economic and livelihood projects, such as increasing costs for refineries and chemical plants, and directly affecting gasoline prices overseas. Rising oil prices push inflation higher, which can constrain monetary policy.

On the early morning of March 19, the Federal Reserve announced that the federal funds rate target range would remain at 3.5% to 3.75%, in line with market expectations. Market observers believe that the current US-Israel-Iran conflict has driven up international oil prices and heightened inflation concerns, forcing the Fed to adopt a cautious stance on future monetary policy.

CICC analyst Liu Gang said that this Fed meeting might be the most conflicted and difficult one: on one hand, non-farm payroll data shows the employment market is beginning to feel pressure; on the other hand, the highly uncertain Iran situation makes it difficult to accurately assess inflation impacts. With no signs of easing in Iran, the meeting lacked enough dovish signals to offset the upward pressure on oil prices, resulting in a hawkish market reaction.

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